Why Arena Pharma Is Winning Big With Its New Collaboration

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Arena Pharmaceuticals Inc. (NASDAQ: ARNA) shares jumped early on Thursday after the company announced a new global license agreement with United Therapeutics Corp. (NASDAQ: UTHR). The goal of this collaboration is to develop Arena Pharma’s Phase 3 investigational drug candidate, ralinepag, for the treatment of pulmonary arterial hypertension (PAH).

Under the terms of the agreement, Arena will grant United Therapeutics exclusive, worldwide rights to develop, manufacture and commercialize ralinepag. In return, Arena will receive up to $1.2 billion, including an upfront payment of $800 million and potential milestone payments totaling up to $400 million, based on the achievement of certain regulatory events.

Additionally, Arena will receive low double-digit tiered royalties on annual net sales of ralinepag.

Management is confident that after achieving FDA approval via at least one of its several different potential regulatory pathways to success, this product will help more than 10,000 patients annually from the 2020s and well into the 2030s.

Amit D. Munshi, president and CEO of Arena, commented:

We believe ralinepag has the potential to transform the treatment of PAH. We are thrilled to partner with United Therapeutics, based on their long-standing, deep commitment to the PAH community. This transaction represents a significant milestone in the development of ralinepag and will strategically position Arena to aggressively advance our best-in-class pipeline, anchored by etrasimod and olorinab, with the focus and resources essential for long-term success.

Shares of Arena Pharma closed Wednesday at $32.52, with a 52-week range of $26.02 to $50.05. The stock has a consensus analyst price target of $61.67. Following the announcement, shares were up 15% at $37.50 in early trading indications Thursday.

United Therapeutics closed Wednesday at $110.97 a share, in a 52-week range of $100.57 to $152.55. The consensus analyst target is $125.64.